Income-tax---

----Refund---Power to withhold refund---Conditions precedent---Assessing Officer must form opinion that grant of refund is likely to adversely affect Revenue---Proceeding pending under Act---Refund withheld under non speaking order---Order liable to be quashed---Income Tax Act, 1961, S.241-- Constitution of India, Art.226.

Section 241 of the Indian Income Tax Ad, 1961, prescribes three conditions and on fulfilment of any of the three conditions, power under section 241 to withhold refund could be exercised. The conditions are: (i) a notice has been issued, or is likely to be issued, under subsection (2) of section 143 in respect of the said return; or (ii) the order is the subject-matter of an appeal or further proceedings: or (iii) any other proceeding under this Ad is pending. On the existence of any one of the aforesaid three conditions, power under section 241 could be exercised. However, existence of such condition only empowers the Assessing Officer to invoke the powers under section 241. The existence of such condition does not relieve the Assessing Officer from forming an opinion that the grant of refund is likely to adversely affect the Revenue.

Held. that, in the instant case, it was an admitted position that some proceedings were pending before the High Court in respect of the assessments of prior years. However, the order withholding refund was a non-speaking order and no reasons were assigned for such action. The order was, therefore, liable to be quashed. It was clarified that it would be open to the income-tax authority to pass a speaking order in accordance with law.

J.P. Shah for Petitioner.

M.R. Bhatt for Respondent.

JUDGMENT

A.P. RAVANI, J: -- Rule.--- Mr. M.R. Bhatt waives service of rule on behalf of the respondent. Having regard to the facts and circumstances of the case, the petition is ordered to be heard today.

The petitioner is a public limited company having two factories in the State of Gujarat and one in the State of West Bengal and having its registered office at Baroda. The petitioner prays that the order passed by the respondent withholding the refund amount of Rs.11,49,345 (Rupees eleven lakh forty-nine thousand three hundred and forty-five) which is due to the petitioner as a result of the assessment order dated January 23, 1992, be quashed and set aside.

The assessment year concerned is 1991-92. The petitioner submitted the return of loss of Rs.10,63,61,760 on December 30, 1991. The respondent passed the order under section 143(1)(a) of the Income Tax Act, 1961, on January 23, 1992. As per this order, an amount of Rs.11,49,345 is computed as an amount of refund payable to the petitioner. Below the order it is stated as follows:--

"With the previous approval of and as determined by the Commissioner of Income-tax, Gujarat (Central), Ahmedabad, refund of Rs.11,49,345 which is due to you as a result of the above order for the assessment year 1991-92 is withheld up to March 31, 1993, or the date of final order of the High Court for the years pending before it, whichever is earlier."

The petitioner contends that, as provided under section 241 of the Act, the respondent has power to withhold the amount of refund, but only the ground that some proceedings are pending under the Act is not sufficient to withhold the amount of refund. Section 241 prescribes three conditions and on fulfilment of any of the three conditions, power under section 241 could be exercised. The conditions are:--

(i) a notice has been issued, or is likely to be issued, under subsection (2) of section 143 in respect of the said return; or

(ii) the order is the subject-matter of an appeal or further proceedings; or

(iii) any other proceeding under this Act is pending.

On the existence of any one of the aforesaid conditions, power under section 241 of the Act could be exercised. In the instant case, it is an admitted position that some proceedings are pending before the High Court in respect of the assessment of the previous year, i.e. 1988-89. However, existence of this condition only empowers the Assessing Officer to invoke the powers under section 241 of the Act. The existence of such condition does not relieve the Assessing Officer from forming an opinion that the grant of refund is likely to adversely affect the Revenue. In the instant case, the order does not show that the Assessing Officer has formed such an opinion and that he came to the conclusion that the grant of refund was likely to adversely affect the Revenue. In short, the order is a non-speaking order and no reasons are assigned for withholding the amount of refund.

In view of the aforesaid position, the order is required to be quashed and set aside on the short ground that the order is a non-speaking order and it does not disclose any reason as to how the Assessing Officer believed that the refund was likely to adversely affect the Revenue. It is clarified that it will be open to the respondent to pass a speaking order in accordance with law. Learned counsel appearing for the respondent states that a reasoned speaking order will be passed by the respondent on or before November 15,1992.

In the result, the petition is allowed. The order withholding the amount of refund of Rs.11,49,345 (rupees eleven lakh forty-nine thousand three hundred and forty-five) which is due to the petitioner as a result of the assessment order dated January 23, 1992, produced at Annexure "A" to the petition is quashed and set aside. It is clarified that it will be open to the respondent to pass a reasoned speaking order. In view, of the statement made by learned counsel appearing for the respondent, it is directed that the said order shall be passed latest by November 15, 1992. Rule made absolute accordingly, with no order as to costs.

M.B.A./25/T.F.Petition allowed.